Michael Novogratz reached out to the US SEC on tokenizing his own company’s shares

Billionaire Michael Novogratz announced his company Galaxy is in talks with regulators on tokenizing already issued shares. Galaxy Digital Holdings, Inc. also runs a crypto platform, which will have a major role in the tokenization. 

Galaxy Digital Holdings, Inc. is interested in tokenizing its own shares, as well as other equities. Billionaire Michael Novogratz is still in talks with the US Securities and Exchange Commission. Based on SEC documents, Galaxy Digital asked for a meeting with SEC representatives at the end of March and the issue is still open. 

While in theory a token can be created to represent any security, this informal tokenization is not enough to draw institutional clients to blockchain space. For that reason, regulators must still make a statement on the limits of tokenization and the application of stock trading rules. 

‘We are working with the SEC to tokenize stocks. They believe in crypto, they believe in the power of tokenized networks and this technology. I think you’ve got to change your horizon for what’s possible,’ said Novogratz in an interview. The company currently spans both traditional and crypto finance, offering tools for miners, traders and other market participants.

Previously, the company only had access to the stock market in Canada, but will now tap US-based demand for crypto companies. Ahead of the new market launch, GLXY traded at $30.57, near a six-month high. 

The decision to tokenize shares arrives just as Galaxy Digital was expecting the launch of its GLXY shares on Nasdaq this Friday.

Michael Novogratz takes an experimental approach to tokenization

Galaxy Digital already manages over $7B in assets at the end of March, with $689M in its known crypto wallets. Novogratz aims to expand the usage of tokens, which can tap the value of shares and use it for DeFi collaterals, lending, or trading. Galaxy may end up tokenizing multiple assets, including other stocks or fixed-income instruments. 

There is still no standard of tokenization in crypto space, and attempts have ranged from ad-hoc tokenization to detailed plans to create new types of tokens to reflect stocks. Currently, the most useful applications for tokenization are for US Treasuries, applied as collateral in DeFi as well as for the creation of stablecoins. 

On-chain assets are currently estimated at $22.51B, with constant growth in the past months. Tokenized public equity is just a small fraction of that amount, at around $400M based on data from Rwa.xyz.

The approach of Novogratz is more experimental, including a tokenized Stradivarius violin from 1708. The tokenized assets are then used for collateralized crypto lending, usually limited to several leading protocols. Gold is also one of the main targets of tokenization, though with a relatively small market compared to traditional finance. 

Galaxy Digital is also a top 10 holder of Bitcoin in its corporate treasury. The company sits on a reserve of 12,830 BTC, down from 13,704 BTC in March. The company reported $295M in losses for Q1, based on diminishing asset prices and outlays due to decommissioning mining activities. 

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